NEWS

Samaras upbeat on recovery but insists VAT rate has to be reduced to boost economy

With the latest agreement with the troika reached, the government is beginning to turn its focus to its next tasks, such as completing the recapitalization of Greek banks and progressing with the privatization process, with Prime Minister Antonis Samaras insisting that Greece can “see light at the end of the tunnel.”

Speaking at the Economist conference in Athens Tuesday, Samaras repeated the upbeat message he delivered on Monday after his government agreed with the troika on the details of structural reforms needed to unlock another 2.8 billion euros of bailout funding.

“It is not just the quantitative indicators but qualitative ones such as competitiveness that show it will be daybreak soon,” he said.

Samaras however stressed the need for aspects of the program to change, particularly with regard to taxation. He said Greece needs to cut its value-added tax rates in order to be able to compete with neighboring countries, where they range between 8 and 10 percent.

The government has so far failed to convince the troika of international lenders that the VAT rate charged by cafes and restaurants should be reduced from 23 percent to 13 percent. Samaras repeated Tuesday that the 23 percent rate for food and drink is too high.

The prime minister said he favored a flat VAT rate of 15 percent for all sectors. He has long seen this as a way of reviving the Greek economy and attracting foreign companies to Greece. In his speech, Samaras suggested that Greece could become the home of firms in the mold of Finnish mobile phone company Nokia.

Having reached an agreement with the troika, the government is now under pressure to complete a number of tasks. The bank recapitalization program is chief among these. Speaking Tuesday, Finance Minister Yannis Stournaras said that Greece’s four so-called “systemic” banks could absorb all the country’s smaller lenders.

“By the end of July, there will have to be a strategy for the whole of the banking sector, including the small banks,” he said.